Traditional And Roth IRA Contribution Limits And Phase Outs

A while back the IRS released their 2010 Traditional and Roth IRA contribution limits. It's a good idea to make sure and watch those limits from year to year to make sure you're investing the full amount possible.

As was expected in most circles the 2010 Traditional and Roth IRA contribution limits will stay the same for the upcoming tax year.

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2010 Roth IRA And Traditional IRA And Contribution Limits

The Traditional and Roth IRA 2010 tax year contribution limits are $5,000 for those under the age of 50. If you’re over 50 you can put in a little bit more, you have the option of making catch up contributions to your account, up to the 50+ limit of $6,000.

Note: Remember, you can contribute to both a Roth IRA and a Traditional IRA in the same tax year, but you can’t go over your limit of $5,000-$6000 when the total contributions to the two accounts are added together. Example: If you were over 50 and contributed $2500 to a Roth IRA, you then be able to contribute only up to $3500 to your Traditional IRA.

Here’s are the Traditional and Roth IRA contribution limits for 2010 and for years past.

Year

Age 49 and Below

Age 50 and Above

2002-2004

$3,000

$3,500

2005

$4,000

$4,500

2006-2007

$4,000

$5,000

2008

$5,000

$6,000

2009

$5,000

$6,000

2010

$5,000

$6,000

Traditional And Roth IRA Phase Outs For 2010 Based On AGI

Traditional and Roth IRAs have phase outs if you make a certain amount of money. Single taxpayers with an annual Modified Adjusted Gross Income (MAGI) over $105,000 begin to see their contribution limit drop until at $120,000 it goes away completely. The limits for Married Filing Jointly investors are $167,000-$176,000.

IRA Type

Single

Married Filing Jointly

Roth IRA

$105,000 – $120,000

$167,000 – $177,000

Traditional IRA

$55,000 – $65,000

$89,000 – $109,000

Contribute To Your Traditional Or Roth IRA Until April 15th

One thing to keep in mind with the IRA accounts is that you can open a new Roth or Traditional IRA right up until tax day on April 15th. If you do make a contribution in 2011 before tax day, be sure to specify which tax year the contribution is being made for, 2010 or 2011.

Differences Between Roth IRA And Traditional IRA Accounts

The main difference between Traditional IRA and Roth IRA accounts is when you end up paying your taxes on the money. Traditional IRA account contributions are made with income before it has been taxed. Because the money is pre-tax your distributions will be taxed at withdrawal. Roth IRA contributions are made with income that has already been taxed. Because of that the money will grow and not be taxed at withdrawal. For a complete look at choosing between retirement accounts, check out the article we wrote earlier this week: What Type Of Retirement Account Should I Choose? Traditional IRA, Roth IRA And 401k.

Do you currently have a Traditional IRA or Roth IRA? Do you have both so that you can tax diversify? Are you contributing right up to the limit?

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